Soft Body hooking stretches instead of moving
The order of the Softbody and Hook modifiers in the Modifier stack is important. For the soft body physics to take account of the hooked vertices it must be positioned below the hook modifiers in the stack. Performing the steps in the sequence in your question (create mesh, add Soft Body, set Vertex Group, add hooks) adds each modifier at the end of the stack so that the Soft Body will be first, followed by the hooks. ie,



Note the Soft Body above the hooks.

This will produce the following results (note that I've added Skin and Subdivision Surface modifiers to make it more visible) :



The modifiers are applied in 'top-down' sequence and so for the Soft Body to take account of the hooks it must occur after the hooks have been applied. Simply use the arrows (at the top-right of each modifier panel) to move the Soft Body to below the hooks and all should be well. ie,



This can then produce the following result :



Note that the only difference between these two results is the order of the modifiers in the stack. 

Blend file included